Chrysler liquidation could result in 38,500 job losses

May 1, 2009, 3:10 pmby Drew Johnson

Although many say a 30 to 60 day "surgical" bankruptcy may be difficult to pull off, Chrysler is hoping to complete its transformation under Chapter 11 protection and avoid Chapter 7 liquidation. Early estimates suggest a Chrysler liquidation would lead to nearly 40,000 job losses and billions in lost pensions.

According to Bloomberg, the Chapter 7 filing of Chrysler would immediately lead to 38,500 job losses. Moreover, retirees could lose up to $9.8 billion in benefits and $2 billion in pension payments.

Although very early in the bankruptcy proceedings, Chrysler is optimistic it will be able to emerge from Chapter 11 in the allotted 30 to 60 days. Chrysler is using a new and relatively controversial bankruptcy tactic of selling the "˜good' parts of the company to a new holding group, while the "˜bad' parts of the company could languish in bankruptcy for years. That maneuver should help Chrysler avoid filing for Chapter 7 while simultaneous speeding up the court process.

However, Chrysler is a long way from out of the woods, with 38,500 workers and many more retirees keeping a close eye on the situation.